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URBONT v. PRUDENTIAL INS. CO. OF AMERICA

August 20, 2003

ALBERT R. URBONT PLAINTIFF, AGAINST PRUDENTIAL INSURANCE COMPANY OF AMERICA, INC., DEFENDANT.


The opinion of the court was delivered by: Thomas Griesa, Senior District Judge

OPINION

Plaintiff Albert Urbont sues the Prudential Insurance Company claiming that Prudential breached an insurance contract providing medical benefits. The claim is that during each year of coverage he was entitled to have medical costs covered up to the amount of $50,000. Urbont seeks declaratory judgment that he is entitled to certain benefits. He also seeks compensatory and punitive damages for breach of contract and includes a claim that Prudential acted in bad faith.

Prudential has moved for summary judgment dismissing Urbont's causes of action. Urbont has in turn cross-moved for summary judgment on his claims. Prudential's motion is granted. Urbont's motion is denied. [ Page 2]

FACTS

In May of 1983 Urbont and Prudential entered into a contract for major medical insurance under which Prudential was to provide coverage to Urbont in the event that he became sick or injured. This type of insurance is distinct from basic hospital or basic medical insurance. The insurance contract was in effect from 1983 through 2001.

The dollar amount of the coverage under the policy was related to what the contract refers to as the "Benefit Term." The Benefit Term is defined as follows:

Each benefit term is a calendar year (January 1 through December 31) except that the first term for a covered person starts on the date such person becomes covered.
The limits on the amount of coverage under the policy are defined in the section entitled "Limit on Total Benefits." The first paragraph of this section states that:
1. We limit the total amount we will pay in one or more benefit terms for all insured charges incurred by a covered person. At the start of the contract, the limit is the initial Aggregate Benefit shown on page 3.
The initial Aggregate Benefit listed on page 3 of Urbont's policy was $50,000. The next paragraph of the Limit on Total Benefits portion of the [ Page 3]

policy describes the method by which the dollar amount of the benefits due under the policy would be calculated. This portion of the policy states that:

When we pay any benefits, a covered person's Aggregate Benefit limit is reduced by the amount of such payments. If this happens, we will later restore either a part or all of the reduction. This will be done by increasing the Aggregate Benefit limit on each January 1 on which the person is a covered person. The increase will be the lesser of $1000 and the amount needed to restore the initial Aggregate Benefit. Any new limit will apply to future insured charges for the covered person.
From 1983 to 1997 Urbont did not incur substantial medical expenses, therefore his $50,000 Aggregate Benefit under the policy remained largely untouched. This changed in 1998 when Urbont's health began to fail due to illness. By May of 2001 Urbont had exhausted his Aggregate Benefit and exceeded his coverage with Prudential by $256.79. This exhaustion resulted from the application of the methodology contained in the language quoted above.

Thus, when payments were made they were deducted from the balance of the Aggregate Benefit. When the amount paid was less than $1,000 that amount was restored the next January 1. If the amount was greater than $1,000, then $1,000 was restored the next January 1. The relevant figures for the years 1995-2001 are shown in the following chart. [ Page 4]

YEAR Amount Amount Paid This Amount of Aggregate Restored Jan 1 Year Benefit Remaining
1995 — $403.54 $49,596.46 1996 $403.54 $2,338.30 $47,661.70 1997 $1,000.00 $3,886.79 $44,774.91 1998 $1,000.00 $5,184.99 $40,589.92 1999 $1,000.00 $13,386.64 $28,203.30 2000 $1,000.00 $23,784.64 $5,418.64 2001 $1,000.00 $6,675.43 ($256.79) OVERPAID $256.79
On May 4, 2001 Prudential notified Urbont that the Aggregate Benefit on his policy had been exhausted. On May 8, 2001 Urbont called Prudential to complain about the notice and requested a detailed explanation of how his $50,000 Aggregate Benefit had been exhausted. On May 10, 2001 Urbont again called Prudential and requested a detailed breakdown of all amounts paid for all charges considered on and after May 1, 1999.

On May 30, 2001 Prudential responded to Urbont's May 10, 2001 inquiry by providing him with a chart showing, for the period of May 1, 1999 to May 10, 2001, each provider of services, the amount of the charge for the provider's services, and the amount paid for each charge. [ Page 5]

On June 19, 2001 Prudential responded to Urbont's May 8, 2001 inquiry and provided him with a chart showing how the Aggregate Benefit had been exhausted. A ...


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